Section 94 Income Tax Act 2025: Which Expenses Are Not Deductible from Other Sources?

Section 94 of the Income-tax Act, 2025 specifies amounts that cannot be deducted when computing income under the head "Income from other sources". It must be read with Section 92 on chargeability and Section 93 on permitted deductions.

What does Section 94 of the Income-tax Act, 2025 provide?

Section 94 imposes specific restrictions on deductions when computing taxable receipts under "Income from other sources". Even if an expenditure is claimed under Section 93, it cannot be deducted if Section 94 expressly prohibits it. Certain provisions normally applicable to business income are also made applicable to this head of income.

Which expenses are disallowed under Section 94(1)?

1. Personal expenses - Section 94(1)(a)

Any personal expense of the assessee is not deductible. Household expenditure, private travel, family consumption and other non-income-related personal costs cannot be set off against taxable income from other sources.

2. Interest payable outside India - Section 94(1)(b)

Interest chargeable under the Act and payable outside India is not deductible where the required tax has not been paid or deducted under Chapter XIX-B. The tax-compliance condition must be checked before claiming the expense.

3. Salary payments outside India - Section 94(1)(c)

A payment chargeable under the head "Salaries" and payable outside India is not deductible unless tax has been paid or deducted under Chapter XIX-B as required.

What additional computation rules apply?

Section 94(2): Sections 29, 35(b)(i) and 36 apply in computing income from other sources in the same way that they apply to profits and gains of business or profession. These cross-references may affect the treatment of particular expenditure and payments.

Section 94(3): Where the assessee is a foreign company, Section 59 applies to the computation of income from other sources in the same manner as it applies to business or professional income. This requires examination of the applicable royalty and fees for technical services provisions.

Can expenses be deducted from lottery, betting or gambling winnings?

No, as a general rule. Section 94(4) prohibits deduction of any expenditure or allowance related to income from winnings from lotteries, crossword puzzles, races (including horse races), card games, other games, gambling or betting of any form. Expenses incurred to obtain such winnings do not reduce the taxable winnings merely because they were actually paid.

What is the exception for owners of racehorses?

Under Section 94(5), the restriction in Section 94(4) does not apply when computing income of an assessee who owns horses maintained for running in horse races, arising from the activity of owning and maintaining those horses. This exception does not create an unrestricted deduction: other applicable computation and deduction rules must still be satisfied.

Section 94(6) defines horse race for this section as a horse race on which wagering or betting may lawfully be made.

Practical examples of disallowed expenses

Relevant definitions and connected statutory provisions

• Income from other sources: The residual head of taxable income governed principally by Section 92, covering receipts not chargeable under the other specified heads.
• Assessee: A person liable under the Act, with the precise statutory meaning determined by its definition provisions.
• Personal expenses: Expenditure of a private or personal character rather than allowable income-earning expenditure.
• Chapter XIX-B: Provisions concerning deduction and collection of tax at source relevant to specified overseas payments.
• Section 93: Deductions potentially allowable from income from other sources, subject to Section 94.
• Sections 29, 35(b)(i), 36 and 59: Specific computation rules incorporated by Section 94(2) and (3).
• Section 58, Income-tax Act, 1961: Broad predecessor provision for amounts not deductible.

Frequently asked questions

Can personal expenses be claimed against interest income?

No. Section 94(1)(a) expressly disallows personal expenses.

Is the cost of lottery tickets deductible from lottery winnings?

No. Section 94(4) disallows related expenditure and allowances when computing lottery winnings.

Does every overseas payment become non-deductible?

No. Section 94(1)(b) and (c) concern specified interest and salary payments and the applicable tax payment or deduction conditions. The facts and other statutory requirements must be examined.

Does Section 94 override Section 93?

Yes, to the extent Section 94 expressly disallows an amount, a deduction cannot be claimed merely by invoking Section 93.

Is horse-racing income always subject to the same no-expense rule?

No. Section 94(5) provides a specific exception for income from the activity of owning and maintaining horses for running in horse races.

Official statutory reference

Consult the Income-tax Act, 2025 as amended by the Finance Act, 2026, particularly Sections 92 to 94, for the operative legislative text.

Updated: 10 November 2026. This article is general legal information; specific tax treatment depends on the applicable tax year and facts.